Travel Bellwether Amadeus’ Booking Data Reveals the Industry’s Scars

International air travel will take at least 18 months to recover, Amadeus said Tuesday, as the coronavirus pandemic drove a collapse in profits at the travel technology company.

Amadeus runs the world’s largest booking network with travel agencies and provides operational software for airlines, airports, and hotels, so analysts consider it a gauge for the health of travel worldwide.

On its own, Amadeus’s travel agency bookings declined by 48 percent in the first three months of the year.

In the last part of February, Amadeus and its peer companies Sabre and Travelport saw a bookings decline of between 30 percent and 40 percent, Amadeus estimated. In March, the so-called global distribution systems saw the bookings they process decline by 80 percent, year-on-year. In April, average daily bookings through the technology middlemen were about 10 percent of the levels a year earlier.

These numbers exclude air bookings made directly through airlines’ sites and some price-comparison search engines and bookings in China, Japan, Russia, and Turkey.

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Analysts focused less than usual on operational specifics in a Tuesday earnings call and instead peppered the management with questions about coronavirus’s impact on the travel sector.

“I really believe it’s too early to really have a trend or to see any improvement,” said president and CEO Luis Maroto on the analyst call. “The volumes are still very negative. We saw the deterioration up to April and then more or less plateauing in very negative figures, very negative.”

Maroto declined to speculate on a 2021 recovery. He also wouldn’t forecast whether travel management companies will face profit pressures leading to more sector consolidation.

In the meantime, some smaller and weaker airlines in Europe who are customers of tech providers may struggle.

“Flybe ceased operations, and a couple of other airlines are either going for Chapter 11 or are trying to restructure their functions,” noted Ana de Pro Gonzalo, chief financial officer. “Basically, most of them are talking with their governments to see how they can continue in business in the longer run.”

Withstanding the Storm

Madrid-based Amadeus reported that profit to March 31 fell 60.5 percent year-over-year to $127 million (€117.8 million).

Global travel restrictions in the first months of the year weighed down on Amadeus’ revenue, which fell 27.3 percent year-over-year to $1.107 billion (€1.021 billion).

The company’s net debt-to-earnings before interest depreciation and amortization, or a measure of its credit-worthiness, as of the end of March was 1.34. Second-larger rival reported net debt to earnings ratio of 4.3, while S&P Global estimated Travelport’s ratio was 7.

Amadeus added to its liquidity with a $1.08 billion (€1 billion) bridge loan and by raising $1.73 billion (€1.5 billion) of capital in early April. The move boosted Amadeus’s net debt to liquidity was 1.04 times its capital.

“We have cash and liquidity available even if in a very stressed scenario goes beyond 2020 and last for the entire 2021,” said de Pro Gonzalo.

Presumably, airlines are asking for lower pricing for service, and travel agents will want higher incentive fees, noted Michael Briest of the research division of investment bank UBS. Might Amadeus try to pick up market share by reducing the usual margins it has in pricing and payment terms?

“I cannot give you a definitive answer,” Maroto said. The company needs to be prudent about the long-term while also meeting its goal of getting incrementally more airline and travel agency customers, he said.